Why don't they invest? Easy really, the immediate outlook is not good.
Industrial investment needs a strong business case. Without that there is no point in dumping the money into a pointless investment.
Keeping cash on-hand gives you flexibility. When the upturn comes (assuming it does), then having cash allows you to move fast.

Noticed you use Taleo for your application submission service. Over the years I and others have experienced that some companies that use their services seem to take much too long and drop more resumes than other application submission programs. It might be plenty of people are trying to submit resumes but are getting frustrated and looking on you unfavorably.

So are you suggesting that companies in Australia should be locked in to buying from lower value suppliers?
That puts them at a disadvantage on the global markets.
Your argument could be applied at so many levels: Why were Australian consumers allowed to buy cheap Japanese transistor radios that put the clunky valve radio manufacturers out of business in the 1960/70s?
Why are Australians permitted to watch Hollywood movies when the Australian movie industry is stressed?
Ultimately unless you provide value you should be out of business. If protectionism keeps you in business then you are damaging other businesses.

Kris:
The article for the NY Time I cited talked about 15-20% wage growth in China. Based on the Average of 17.5, that is a doubling every 5 years. 50 years would be too long to wait for positive change, but perhaps substantial change favoring domestic manufacturing may happen in the next five years or so.
My views on regulations are just my opinions. My impression is that China does not go far enough in the area of pollution control, and that the U. S. sometimes goes to far but I could be wrong. For example, should we be prevented from buying out of state health insurance by law or regulation? Should employers be required to include certain non essential coverages in the policies they provide their employees if doing so would mean that could not provide insurance at all. If an under skilled 18 year old from a family on welfare would be willing to work for 80% of minimum wage, and a small business would be willing to hire them, but only at that wage, is it good that the minimum wage laws require them to remain unemployed and not gaining skills?
John

"1. Common sense says that you locate your factory close to your demand to minimize logistics and inventory management (Supply Chain 101). "
no longer true. You can take a couple of pints of water (quite heavy, you'll note), put it in a plastic bottle, ship it to New Zealand or Vanuatu, and sell it for a couple of bucks at a profit. It no longer makes sense to say you have to be close to the facility

To John: Your statement that regulations go too far seems to be contradictory to increased level of pollution, especially in China...I doubt that pollution protests there will accomplish much...your extrapolation of low cost manufacturing to become high costs over time might take 50 years to realize, I think it will be too late for US manufacturing at that point, it will be completely gone by then...Kris